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Edited version of your written advice
Authorisation Number: 1051346152035
Date of advice: 5 March 2018
Ruling
Subject: CGT cost base on asset transferred under marriage breakdown rollover.
Question
Where the CGT asset is transferred to you because of a court order under the Family Law Act 1975 (FLA 1975), is the cost base of the asset calculated using the market value of the asset at the date you acquired it?
Answer
No. The cost based is calculated in accordance with section 126-5(5) of the Income Tax Assessment Act 1997 (ITAA 1997).
This ruling applies for the following period:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You and your former spouse purchased an investment property as tenants in common, with equal shares, in 1990.
Under consent orders granted in 2008 pursuant to the Family Law Act 1975, your former spouse agreed to transfer all their right title and interest in the property to you.
You then sold the property in 2017.
Relevant legislative provisions
Section 126-5(5) of the Income Tax Assessment Act 1997
Family Law Act 1975
Under subsection 126-5(5) of the ITAA 1997, if the asset was acquired by the transferor on or after 20 September 1985 and was transferred between spouses because of a court order under the FLA 1975, the first element of the asset’s cost base in the hands of the transferee is the asset’s cost base in the hands of the transferor at the time the transferee acquired it.
Your cost base for the property is the same as your former spouse’s cost base at the time the property was transferred to you. That is, the cost base of the asset for you is the same as what your former spouse would have used to calculate the capital gain or loss if the property had been sold instead of being transferred.
Further information for you to consider
Section 115-25 of the ITAA 1997 generally allows any individual to apply a 50% discount to any capital gain provided that the CGT event to which the capital gain relates occurs at least 12 months after the asset is acquired.
As you and your former spouse owned the property for more than 12 months you have already passed this test and the 50% CGT discount will apply to any capital gain you made.